Warning shot: will the non-doms pack their bags?

Business objections to Alistair Darling's tax grab have been spiced up with dire warnings about the fate of the economy if the non-doms depart for the embrace of a more generous government. But as in everything to do with this issue, the facts are sketchy at best.

Stuart Adam, who has analysed the policy for the authoritative Institute for Fiscal Studies, is disarmingly blunt. 'How many people are going to leave the country? We don't have any facts on that. It's all anecdotal evidence,' he says. 'If people did leave the country, what would the damage be? Quantifying it is difficult to the point of impossible.' Since only Malta, Cyprus and Ireland have similar regimes, there is no historical example of a similar change being implemented to help economists guess how likely it is that multi-millionaires will flee the country.

One widely publicised report, compiled by the Society of Trust and Estate Practitioners (Step), claimed that non-domiciled individuals already pay £7bn a year in taxes, including VAT, council tax and so on - and that half of them were considering leaving the country. However, Adam says Step's methodology is flawed, based as it is on heroic assumptions about what the 'average' non-dom's spending patterns are likely to be.

The new £30,000 levy will only apply to those who have been in the country for at least seven years. On the Treasury's official estimates, of the 115,000 people who currently claim non-dom status, more than 20,000 will hit the seven-year limit annually, and be forced to decide whether it is worth their while to pay the levy. Of those, it reckons just 4,000 will pay up; 14,000 or so will decide to move to being taxed on their earnings on the normal basis; and about 3,000 each year will opt to leave Britain rather than see their tax bills rise.

The levy itself, plus the tax paid by those who choose to pay normal tax, is expected to raise a paltry £350m next year, with the abolition of personal tax allowances for non-doms bringing in another £230m, and the closing of a series of loopholes that help them to salt their earnings away offshore, another £150m. If the Treasury's calculations are correct, the reaction to the proposals from City bigwigs seems disproportionate at best.

Of course, symbolism can be important in tax policy. When Lord Digby Jones slammed the rule change last week, it was as much about mood music, and the signal it would send out to the super-rich, as the direct, financial impact of the changes. But whether an exodus of talent is really in the offing - and what the damage to the economy might be - remains to be seen.